Buy the Dip on US Treasury ETFs? Three Duration Blind Spots That Can Shrink Your Principal by 30%
Hundreds of thousands of people in Taiwan keep buying the dip on long-duration US Treasury ETFs without realizing that products with a 15-to-20-year duration can cut your principal in half in a rising-rate environment, just as the iShares 20+ Year Treasury Bond ETF (TLT) lost more than 50% from its 2020 high to its 2023 low. This article breaks down three blind spots you must understand before adding more: the math of duration times interest-rate moves that decides your maximum drawdown, the trap where yield does not equal total return and monthly distributions can come out of your own principal, and the hidden costs of FX hedging and premium/discount mechanics that are specific to Taiwan-listed US Treasury ETFs. It provides four iron rules and a four-step action plan to help you decide whether buy-the-dip is right for your situation, plus an extreme-scenario backup plan to keep your retirement savings from getting trapped by rates you cannot control.